Antecedents and Context of Chinese Firms’ Foreign Exit

Sasa Ding and Yajun Liu ()
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Sasa Ding: School of International Business, Southwestern University of Finance and Economics, Chengdu 611130, China
Yajun Liu: School of International Business, Southwestern University of Finance and Economics, Chengdu 611130, China

Sustainability, 2024, vol. 16, issue 11, 1-19

Abstract: This paper examines the outward foreign direct investment events of Chinese manufacturing firms from 2008 to 2022. It explores how sunk cost and performance feedback drive firms’ foreign exit strategies based on the behavioral theory of the firm. Additionally, it also examines the contextual factor that may affect the focal relationship. We adopt a panel logistic estimation to test the hypotheses. The conclusions show that firms are more likely to exit overseas markets when faced with sunk costs and negative performance feedback. Conversely, positive performance feedback significantly decreases the probability of firms exiting foreign markets. Additionally, environmental munificence and complexity can weaken the strength of the focal nexus to some extent. These findings hold both theoretical and practical significance for multinational enterprises and the government in the context of the ‘dual-circulation strategy’.

Keywords: sunk cost; performance feedback; foreign exit strategy; behavioral theory of the firm (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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